Banco Santander, S.a. · BME:SAN
Banco Santander — FY2023 Earnings Presentation
59 slides from Banco Santander's earnings presentation, Jan 31, 2024
Slide 1: Earnings Presentation 2023
31 January 2024 Earnings Presentation — 2023
Slide 2: Important information
Important information Non-IFRS and alternative performance measures This presentation contains financial information prepared according to International Financial Reporting Standards (IFRS) and taken from our consolidated financial statements, as well as alternative performance measures (APMs) as de
Slide 3: Important information
Important information While these forward-looking statements represent our judgement and future expectations concerning our business developments and results may differ materially from those anticipated, expected, projected or assumed in forward-looking statements. In particular, forward looking sta
Slide 4: Index
Index 1 2 3 4 2023 Highlights Group Final remarks Appendix Progress of our strategy review 2024 Guidance 4
Slide 5: Achieved a record year and delivered on our financial targets
Achieved a record year and delivered on our financial targets FY’23 Attributable Profit FY’23 Revenue Record results with 5mn new customers YoY contributing to double-digit revenue growth €11.1bn €58bn +15% +11% Cost-to-income RoTE First year of ONE Transformation is driving profitable growth and st
Slide 6: All time high attributable profit boosted by double-digit net operating income growth
All time high attributable profit boosted by double-digit net operating income growth P&L Current Constant € million 2023 2022 % % Delivered on Group 2023 targets NII 43,261 38,619 12 16 Double-digit revenue growth Net fee income 12,057 11,790 2 5 Other income 2,329 1,745 33 11 Efficiency ratio impr
Slide 7: Strong performance drove higher organic capital generation and TNAVps + Cash DPS growth
Strong performance drove higher gross organic capital generation and TNAVps + Cash DPS growth of 15%, while improving our payout to 50% FL CET1 TNAVps + Cash DPS 2023 shareholder remuneration +c.50bps % € per share Cash DPS: €14 cents like-for-like Total shareholder +1.19 +15% remuneration 4.90 12.0
Slide 8: Our business model and strategy deliver sustained earnings with lower volatility
Our business model and strategy deliver sustained earnings with lower volatility and allow us to accelerate profitable growth and shareholder value creation High profitable growth Increasing remuneration and strengthening capital Attributable profit1 (€bn) Dividends & Buybacks2 (€bn) Dividends3 Covi
Slide 9: A strong first year in our new phase of value creation
A strong first year in our new phase of value creation for our shareholders… 2023 vs. 2025 ID targets Strength Disciplined capital allocation FL CET1 RWAs with RoRWA > CoE 12.3% TNAVps + DPS 84% +15% >12% c.85% Double-digit growth average through-the-cycle Shareholder remuneration Profitability Payo
Slide 10: Leveraging our business model strengths: diversification, customer focus, scale
…leveraging our business model strengths: diversification, customer focus and global and in-market scale Our two key strategic and …are driving structural benefits helping us become the most operating advantages… profitable bank in every market Higher growth in customer Leadership position revenue a
Slide 11: Global Businesses: last step towards ONE Santander
With our last step towards ONE Santander, we have laid the foundation to capture the full potential of our in-market and global value Our model capitalizes on our strategic advantage of Tangible progress on our transformation combining global capabilities with local expertise Retail Retail & Commerc
Slide 12: Retail: driving growth and efficiency
Retail Driving growth and efficiency on the back of our new model and proprietary technology Customer experience Operational leverage Global platform 2025 target c.17% RoTE Common operating Proprietary back-end 15.1% 2023 Product simplification model globally (Gravity) and our cloud and digital firs
Slide 13: Consumer: transforming into a best-in-class global business
Consumer Transforming into a best-in-class, global business and operating model Customer experience Operational leverage Global platform 2025 target > 14% RoTE Global relationship Operational & commercial From multiple country- 11.5% 2023 management benchmark to maximize specific platforms to global
Slide 14: CIB: playing to our strengths
CIB Playing to our strengths to better serve our corporate customers and institutions Customer experience Operational leverage Global platform 2025 target >20% RoTE Continue growing fee and Optimize capital returns Trusted advisor for our 17.5% 2023 transactional business on the back of origination
Slide 15: Wealth: accelerating customer connectivity with global platforms
Wealth Accelerating our customers connectivity with our global product platforms Customer experience Operational leverage Global platform 2025 target Leverage our global c.60% RoTE Providing our customers Global platforms and operations and factories to 72.2% 2023 specialized infrastructure connect
Slide 16: Payments: seizing a growing opportunity through global platforms
Payments Seizing a growing opportunity by capturing scale through global platforms Customer experience Operational leverage Global platform 2025 target PagoNxt Migrate volumes to Deliver best-in-class common global platforms >30% EBITDA margin Reduce cost per transaction payment solutions 24.8% 2023
Slide 17: Clear plan to accelerate performance in the US by 2025
Clear plan to accelerate performance in the US by 2025 by business line RoTE Current position Strategic objectives KPIs 2023 2025 ID Market-leading, US retail deposit cost-to-serve Mid- Consumer full-spectrum auto lender • Launch of new digital platform 2022 2023 2025 11% high in summer of 2024 teen
Slide 18: Global platforms deliver operational leverage and profitable growth
In summary, our global platforms will deliver operational leverage and profitable growth to become the most profitable bank in every market Most upside from changes to common platforms in Retail, Consumer and Payments, which represent 81% of total revenue Revenue Contribution to 2025 RoTE2 Efficienc
Slide 19: Index
Index 1 2 3 4 2023 Highlights Group Final remarks Appendix Progress of our strategy review 2024 Guidance 19
Slide 20: All time high attributable profit boosted by double-digit net operating income growth
All time high attributable profit boosted by double-digit net operating income growth Attributable profit P&L Current Constant € mn € million 2023 2022 % % +28% NII 43,261 38,619 12 16 +34% Net fee income 12,057 11,790 2 5 excluding 2,902 2,933 Argentina Other income 2,329 1,745 33 11 2,670 2,543 2,
Slide 21: Double-digit revenue growth backed by customer activity
Double-digit revenue growth backed by customer activity across businesses Total revenue Revenue trends Constant € mn +16% Total 15,406 • >95% of total revenue is customer related which drives the revenue 13,227 13,729 13,964 14,548 Group vast majority of total revenue growth 12,462 12,384 12,881 Oth
Slide 22: NII and NIM up YoY
NII and NIM up YoY, supported by volumes and margin improvement Net interest income and NIM NII drivers 2.82% 2.76% • NII growing YoY across regions: 2.63% 2.74% 2.45% 2.52% 2.56% 2.56% NIM - Europe (+27%) and North America (+3%) driven by the Quarterly positive sensitivity to interest rates of our
Slide 23: Net fee income growth
Net fee income growth, demonstrating the value added from our business diversification Net fee income YoY % changes in constant euros Net fee income drivers Constant € mn +7% • Active customers increased YoY Retail • Transactionality and well-targeted services to segments 3,028 3,083 2,923 2,982 2,9
Slide 24: ONE Transformation driving efficiency and positive jaws
ONE Transformation driving efficiency and positive jaws Costs Costs and efficiency drivers Efficiency 45.0% 46.0% 45.6% 46.6% 44.1% 44.3% 43.6% 44.4% • Transformation towards simpler and more integrated Quarterly models drove efficiency improvements in 2023 • In 2023, efficiency improved to 44.1% (-
Slide 25: Consistent execution of ONE Transformation
Consistent execution of ONE Transformation and value added from our Global and Network businesses accelerating the achievement of our ID targets Global & Network Global Tech FY’22 One Transformation businesses capabilities & others FY’23 45.8% -112 bps -28 bps -32 bps 44.1% • Product simplification:
Slide 26: Credit quality remains robust with CoR within target
Credit quality remains robust with CoR within our target for 2023 LLPs and credit quality Credit quality drivers 0.99% 1.05% 1.08% 1.13% 1.18% 0.77% 0.83% 0.86% CoR • Credit quality remains robust, despite substantial 2,991 3,223 3,484 Group impacts from one-offs, supported by record low 2,692 2,883
Slide 27: Diversified commercial banking model funded with stable retail deposits
Diversified commercial banking model funded with stable retail deposits Loan portfolio and customer funds Deposit structure Dec-23 Dec-23 €1,177bn +4% €1,015bn -1% Total Mutual CIB funds 209 +13% deposits1 Transactional c.75% 136 -6% CIB 155 -3% SMEs 245 -1% & Corp SMEs, Corp 250 +4% Deposits Consum
Slide 28: CET1 well above our target of >12%
CET1 well above our target of >12%, driven by strong capital generation, with profitable front-book growth >15% RoTE FL CET1 quarterly performance Maximize capital productivity % Dec-23 or estimates +0.29 12.5 Front book pricing +0.04 +0.04 2.7% RoRWA of new book -0.12 12.3 12.3 -0.26 Asset rotation
Slide 29: Index
Index 1 2 3 4 2023 Highlights Group Final remarks Appendix Progress of our strategy review 2024 Guidance 29
Slide 30: Record results in our first year of new phase of value creation
Record results in our first year of our new phase of value creation and growth Excellent progress in the execution of our strategy Efficiency and profitability improvement €11.1bn 44.1% +21.5% Resilient balance sheet with a stronger capital ratio Foundation for further growth, value creation and sha
Slide 31: A great set of results delivering on all our 2023 targets
In summary, a great set of results delivering on all our 2023 targets Our 2023 2023 targets achievement Revenue1 Double-digit growth +13% Efficiency ratio 44-45% 44.1% CoR <1.2% 1.18% FL CET1 >12% 12.3% RoTE >15% 15.1% (1) YoY change in constant euros. 31
Slide 32: Well positioned to continue driving profitable growth in 2024
Looking ahead, we are well positioned to continue driving additional profitable growth in 2024 Our consistent track record and the implementation of ONE Santander make us confident we will deliver on the following targets in 2024 Mid-single digit growth <43% c.1.2% >12.0% 16% Revenue1 Efficiency CoR
Slide 33: Index
Index 1 2 3 4 2023 Highlights Group 2024 Guidance Appendix Progress of our strategy review Final remarks 33
Slide 34: Appendix
Appendix Investor Day Targets summary Detail by region, country and global business Credit quality in Brazil and the US Reconciliation of underlying results to statutory results Glossary The other information in the Appendix regularly provided each quarter can be found in the document entitled "Supp
Slide 35: ONE Transformation driving double-digit growth in value creation
ONE Transformation driving double-digit growth in value creation 2022 2023 2025 targets RoTE (%) 13.4 15.1 15-17 Profitability Payout (Cash + SBB)1 (%) 40 50 50 EPS Growth (%) 23 21.5 Double-digit Total customers (mn) 160 165 c.200 Customer centric Active customers (mn)2 99 100 c.125 Simplification
Slide 36: Appendix
Appendix Investor Day Targets summary Detail by region, country and global business Credit quality in Brazil and the US Reconciliation of underlying results to statutory results Glossary The other information in the Appendix regularly provided each quarter can be found in the document entitled "Supp
Slide 37: Detail by region and country
Detail by region and country 37
Slide 38: Europe
Europe Highlights Key data and P&L • Focus on transformation projects to develop a common operating Loans Deposits Mutual Funds model (OneApp, OneWeb, OnePlatform) and increase customer satisfaction €552bn -6% €620bn -2% €105bn +12% • Customer growth continued (+730k YoY), mainly driven by consisten
Slide 39: Spain and UK
España and UK Spain UK • Sustained strong growth in customers. Dropping deposits explained • Higher rates continued to affect loan volumes and deposits, with by mortgage prepayments. Half of the decline in loans came from CIB strong migration from demand to time deposits • Profit +52% driven by high
Slide 40: Portugal and Poland
Portugal and Polonia Portugal Poland Poland • Focus on profitability, rather than market share. Loans under pressure • Loans rose mainly driven by corporates and CIB. Significant growth from higher rates. Excellent liquidity management, with cost of both in demand and time deposits deposits under co
Slide 41: North America
North America Highlights Key data and P&L • Accelerate the transformation of our businesses simplifying our product Loans Deposits Mutual Funds portfolio, streamlining operations and delivering an excellent customer experience while further building out CIB and Wealth franchises €161bn +3% €142bn +4
Slide 42: US and Mexico
USA y Mexico US Mexico • Deposit base growth despite challenging environment. Lending up • Strong customer growth, driving volume increase, and profitable market driven by Multifamily and CIB share gains • Revenue impacted by higher funding costs, a one-off FDIC charge and • Excellent profit and pro
Slide 43: South America
South America Highlights Key data and P&L Loans Deposits Mutual Funds • We are focusing on increasing the value added to the Group and promoting synergies across our global and regional businesses €161bn +7% €135bn +15% €70bn +21% • Customer growth and higher transactionality Efficiency CoR RoTE 38.
Slide 44: Brazil and Chile
Brasil and Chile Brazil Chile • Growth in loans (individuals, corporates and SMEs) and deposits • #1 NPS. Continued business transformation to offer the best (time) products and services • Profit down YoY affected by weak NII due to negative sensitivity, • Profit YoY impacted by negative NII sensiti
Slide 45: Argentina and Uruguay, Peru and Colombia
Argentina y Uruguay Argentina Uruguay, Peru and Colombia • #1 NPS, with one of the best rated apps among local banks • Focus on digital expansion in Uruguay and on joint initiatives between CIB and Corporates in Peru and Colombia • Profit up YoY driven by strong revenue growth and efficiency improve
Slide 46: Digital Consumer Bank Europe
Digital Consumer Bank Europe Highlights Key data and P&L New lending Loans Customer Funds • We continue to reinforce our leadership in mobility though new strategic alliances and our leasing & subscription businesses €52bn +3% €135bn +8% €73bn +19% • Leasing contracts rose +15% YoY, driven by SCF. N
Slide 47: Corporate Centre
Corporate Centre Highlights Income statement Underlying P&L* 2023 2022 • Lower attributable loss as NII improved significantly driven by NII -41 -652 higher liquidity buffer remuneration as a result of the higher interest rates Gains / losses on financial transactions -302 -724 Operating expenses -3
Slide 48: Detail by global business
Detail by global business Reflecting the new operating model announced in September. Note: for more information, see also the presentation published on 20 December 2023 that explains the new operating model and adapted financial disclosures. 48
Slide 49: Retail & Commercial Banking and Digital Consumer Bank
Retail & Commercial Banking Digital Consumer Bank • We continued to drive the digitalization and simplification of our • Strengthening our franchise through common commercial partners products and services through ONE Transformation and operating standards • Loans down 3% mainly due to prepayments i
Slide 50: Corporate & Investment Banking and Wealth Management & Insurance
Corporate & Investment Banking Wealth Management & Insurance • Strong revenue performance of the CIB US franchise with relentless • Contribution to Group profit increased 15% YoY, in a capital-light focus on the execution of our growth strategy business, with a RoTE above 70% • Profit +16% YoY, with
Slide 51: Payments: PagoNxt and Cards
PagoNxt Payments Cards • Getnet TPV increased 22% YoY across markets (Getnet Brazil +14%; • 99 million cards, growing in line with the positive trends of Getnet Europe +31%; Getnet Mexico +23%; Getnet Chile +80%) previous quarters • Payments Hub already one of the largest processors of A2A • Solid g
Slide 52: Appendix
Appendix Investor Day Targets summary Detail by region, country and global business Credit quality in Brazil and the US Reconciliation of underlying results to statutory results Glossary 52
Slide 53: Brazil and US credit quality
Brazil and US credit quality Brazil US Cost of risk US Auto Net Charge-Off Rates1 Estimated to remain below pre-pandemic 8.0% “normal levels” 7.0% 6.7% 4.9% 4.8% 4.8% 6.0% 5.3% 4.5% 4.4% 4.1% 3.9% 4.3% 3.7% 5.0% 4.3% 4.0% 3.7% 3.6% 3.0% 2.0% 1.7% 2015 2016 2017 2018 2019 2020 2021 2022 2023 1.0% 0.0
Slide 54: Appendix
Appendix Investor Day Targets summary Detail by region, country and global business Credit quality in Brazil and the US Reconciliation of underlying results to statutory results Glossary 54
Slide 55: Reconciliation of underlying results to statutory results
Reconciliation of underlying results to statutory results January-December 2023 January-December 2022 Statutory Underlying Statutory Underlying Adjustments Adjustments results results results results Net interest income 43,261 — 43,261 38,619 — 38,619 Net fee income 12,057 — 12,057 11,790 — 11,790 G
Slide 56: Appendix
Appendix Investor Day Targets summary and our last step towards ONE SANTANDER Detail by region, country and global business Credit quality in Brazil and the US Reconciliation of underlying results to statutory results Glossary 56
Slide 57: Glossary - Acronyms
Glossary - Acronyms • ALCO: Assets and Liabilities Committee • FL: Fully-loaded • RoRWA: Return on risk-weighted assets • AM: Asset management • FX: Foreign exchange • RoTE: Return on tangible equity • AuMs: Assets under Management • FY: Full year • RWA: Risk-weighted assets • bn: Billion • IFRS 9:
Slide 58: Glossary - Definitions
Glossary - Definitions PROFITABILITY AND EFFICIENCY • RoTE: Return on tangible capital: Group attributable profit / average of: net equity (excluding minority interests) – intangible assets (including goodwill) • RoRWA: Return on risk-weighted assets: consolidated profit / average risk-weighted asse
Slide 59: Thank You.
Thank You. Our purpose is to help people and businesses prosper. Our culture is based on believing that everything we do should be: